Trade deficit for March is expected to narrow as the impact of a prolonged winter lessened and global demand grew.
Majority of economists polled by Bloomberg predict the deficit to narrow to $40 billion from February’s $42.3 billion.
“Weather shouldn’t play a big impact on trade because global demand is not highly correlated with it,” said Cheng Chen, strategist at TD Securities.
“It will improve exports which will be stimulated by strong global demand.”
In the past few months, trade deficits have been increasing and the bad weather which began in December. While the bad winter continued until March, economic indicators pointed to a stronger economy.
Jeffries & Co. Inc. Chief Financial Economist Ward McCarthy said these indicators show trade figures will also improve as demand for products went up.
Retail sales, housing starts and auto sales showed improvement in March despite the continued winter weather. Some retail and auto products are exported.
“The economy improved from a dismal winter. We will see exports go up and imports go down slightly,” said McCarthy.
McCarthy said trade figures have been increasing until recently but the downturn is small blip in the numbers and not indicative of an overall problem with global economy.
February exports dropped to $190.4 billion from $192.5 billion. Imports totaled $232.7 billion, higher by $1 billion.
Petroleum products are believed to post a stronger performance in March. American exports and imports of petroleum products have been growing prompting economists to say the increase is due to increased economic activity. The more demand for gasoline, diesel and oil is linked to the use of vehicles and heating offices.
In March, it is expected that more people bought gas and oil.
“There will be an increase in petroleum exports and imports. Gas volumes were up as oil prices dropped and moved people to buy,” said Chen.
Exports of industrial goods in March, including petroleum products, dropped to $41 billion from $43.7 billion.
Petroleum exports fell to $5 billion in March. Imports also fell slightly.
The continued downturn of Chinese manufacturing is not expected to impact U.S. trade in March.
China’s manufacturing industry contracted for a fourth straight month in April. China is one of the largest exporters to the U.S.
The coming months are also expected to do better for trade especially as indicators are showing continued improvement.
“We see improve in the coming months and see the deficit narrow more,” Chen said.